Nikkei Drops 1.5% After BoJ Left Bond Policy Intact

5:30 PM Tokyo – Bank of Japan left its policy actions unchanged after a 2-day meeting and bond yields rose and the yen declined. The central bank did not extend the recent bank loans maturity to two years from one year as expected by traders. Softbank lifted its offer for Sprint Nextel by 7.5%.

Market indexes in Tokyo closed lower after the Bank of Japan held firm on its stimulus plan and did not accommodate a growing chorus from bankers and economists to extend the maturity of recent bank loans.

Traders and economists had built up expectations of a new policy action from the Bank of Japan to extend the maturity of bank loans to two years from the current one year. However, the central bank offered no change in the current policy directive.

Bank of Japan announced on April 4 to purchase 7 trillion yen or $69 billion of government bonds every month, to double the amount of cash in the financial system in two years and lift inflation above 2%.

Japanese government bond yield has increased to 1% from as low as 0.32% on April 4.

The Nikkei 225 Stock Average declined 196.58 or 1.5% to 13,317.62 and Topix index fell 10.82 or 1% to 1,101.15. Trading volume was 20% below its average for last one-month of trading.

The yen strengthened to 97.79 against one dollar in today’s trading after the Bank of Japan left its stimulus policy intact and did not announce new measure to stem bond market volatility.